Country Report Morocco April 2009

Outlook for 2009-10

• The Economist Intelligence Unit expects the political scene to remain generally stable, with no serious challenges to the central role of the king, Mohammed VI.
• Parliament will remain weak, with no party having a strong power base, and there will be widespread public disaffection with formal politics, particularly given the continued prominence of the monarchy in decision-making.
• Poverty and rising unemployment will be sources of discontent, and many Moroccans will turn to Islamist political movements as a result, but only a small minority of Moroccans are likely to support militant groups.
• Despite improved tax penetration, the budget deficit is expected to average 3.7% of GDP in 2009-10 as weaker GDP growth hits revenue and the government embarks on a major public investment programme.
• We have lowered our forecast for real GDP growth because of the worsening outlook for the EUMorocco's main export marketalthough a strong harvest in 2009 will mean that Morocco just avoids recession.
• We have lowered our forecast for export earnings but still expect Morocco's current account to swing from deficit in 2008 to surplus in 2009-10.

Monthly review

• Morocco's relations with Iran have reached a new low following a seemingly minor dispute, with diplomatic ties cut formally in March.
• The Parti authenticite et modernite, which has close ties to the king, has suffered from defections in recent months but has also found a new ally for the 2009 municipal elections.
• The energy minister, Amina Benkhadra, has presented a US$10.3bn national energy plan that will focus on raising capacity, developing hydrocarbons and increasing the use of renewable energy.
• The Bank al-Maghrib (the central bank) cut its benchmark interest rate to 3.25% from 3.5% in late March, in anticipation of price stagnation and a worsening global economic outlook. Property prices have fallen in recent months.
• Although the Moroccan economy performed better in 2008 than in 2007, when a drought hit, it has begun to feel the effects of the global downturn, with the rate of overall GDP growth falling in every quarter of the year.
• The total volume of shares traded on the Casablanca Stock Exchange dropped by more than 30% year on year in the first quarter of 2009.
• Kuwait's Mobile Telecommunications Company (Zain Group) has said that will buy a 31% stake in Morocco's third telecoms operator, Wana.